Reference no: EM132563430

Question - The Potato Company produces frozen french fries and therefore uses potatoes as the major raw material in its manufacturing process. Potato enters a forward exchange contract to purchase 20 bushels of potatoes in 30 days for $1,200. The contract has a net settlement provision. Assume that potatoes are not easily convertible into cash and that Potato has a history of taking delivery of the potatoes under these types of contract (gross settlement). Potato has decided not to document the instrument as a normal purchase and sales contract. Prepare the journal entries required under both US GAAP and IFRS separately, with detailed explanations of the basis for each dollar journal entry amount, and a detailed journal entry explanation with appropriate references to the accounting literature for both standard-setters for each respective journal entry.